Credit cards don’t age like fine wine. Sometimes your oldest ones have the fewest perks and benefits, so you stop using them.
Is it a problem to have a credit card you never use? And if you close it, what happens to your credit score?
Does an unused credit card affect your credit score?
Several factors affect credit scores. The two biggest influences are your payment history and how much of your credit limits you use.
Let’s start with the scenario that you only have one credit card. Your best bet is to use it sparingly and pay it off on time, every time.
Faithfully paying that bill helps build up a good payment history.
Using a small amount of the limit helps your credit utilization, the second-biggest factor in your credit score. Credit experts recommend using less than 30% of your credit limit, and it’s even better to stay under 10%.
If you have a lot of credit cards, using any one of them becomes much less important.
If you have a lot of credit cards, using any one of them becomes much less important. Some people let several cards sit dormant as they use other cards to collect reward points. They could conceivably cancel those unused cards to save on annual fees, if any.
How closing a credit card can affect your score
Closing a credit card account — whether it’s unused or active — can hurt your credit score primarily because it reduces the amount of available credit you have.
If the card you close has a small credit limit, you may see little or no effect. But if it has a large limit, closing that card could have a big impact on your score because you’re lowering your total credit limit. Credit utilization is calculated both overall and per card, so removing a big limit from your total can send your utilization up and your score down.
A secondary way that closing a card can affect score is by lowering your average age of credit accounts. But that is a relatively minor factor.
A closed card can remain on your credit report for years, letting your score benefit from a positive payment record.
You don’t need to worry about payment history, though: A closed card can remain on your credit report for years, letting your score benefit from a positive payment record.
Alternatives to closing a credit card
If you don’t use a credit card but are reluctant to close it because of the possible impact on your credit score, you still have choices:
- Call the issuer and ask to change to a card from the same issuer that is a better fit. You can ask to be downgraded to a card without a fee, for example.
- Keep the card open, and put a small recurring charge on it to keep the issuer from closing it due to inactivity. Consider using autopay or calendar reminders so you don’t miss a payment and hurt your score.
- Apply for a card you do like, and be sure the addition of its credit limit is high enough to replace the one on the card you don’t use. Then, close the unused credit card.
Some credit card accounts aren’t worth keeping. Secured credit cards, for example, are geared toward building or rebuilding credit. If you’ve already done that, and you don’t use the card, it may make sense to cancel it and get your deposit back or ask to transition to an unsecured card.
Other cards that are OK to cull are:
- Low-credit-limit cards you don’t use anymore.
- Store cards from retailers you no longer patronize. Those cards tend to have relatively low limits, so even modest use can lead to high utilization.
- Cards with fees you don’t believe are worth it, assuming the issuer doesn’t offer a card that is more appealing to you.